Celent forecasts global
IT spending by financial services institutions to grow 3.7% to
$363.8bn, compared with modest growth of 2.5% in 2010. While there
is evidence that IT expenditure is accelerating, there will be
substantial regional variations with spending rising fastest in


Bar chart showing IT spending forecasts by region from 2009-2013The turnaround in banks’
IT expenditure has begun, according to Celent’s IT Spending in
Financial Services: A Global Perspective.
Banks’ IT spending
across North America, Europe, and Asia-Pacific will grow to
$169.6bn in 2011, up 4.1% year-on-year; growth in 2010 was only

The most impressive growth
will be in Asia-Pacific: by 5.9% in 2011 to S$56bn, and another 6%
in 2012.

For the next two years, IT
expenditure increases by North American banks of 4% and 4.6% are
forecast. By contrast, more modest rises of 2.5% and 2.4% are
expected from banks in Europe.

Not surprisingly, retail
banking in North America dominates banks’ IT

Banks will spend $33.4bn
(62.5% of total IT spending) on retail banking in 2011, $28.8bn in
the US and $4.7bn in Canada.

Canadian retail IT spending
will grow by a solid 5.1% and 4.2% in the next two years as banks
invest in strategic initiatives. Core systems enhancements and
internet banking upgrades will contribute to this

While there are efforts under
way to reduce the reliance on costly legacy systems, the allocation
to internal spending is expected to remain relatively constant over
the next couple of years in North America.

Notably, spending on external
software by US banks will rise by 7.3% in 2010 to $8.6bn in 2011
and hit $9.9bn by 2013. In Canada, the country’s banks will
increase spending on external software by 8.6% to $1.3bn in

North American banks’ IT
priorities include:

  • Changing economics
    of debit cards.
    Particularly as a result of Regulation E –
    and the implications of the Dodd-Frank Act.
  • Re-focus on
    About half of current accounts are
    unprofitable – banks need to identify profitable
  • Data and
    Banks have a ton of idle data and need to
    identify customer needs to exploit revenue-generating
  • Banks still do not
    get social media.
    Most banks are look at social media in a
    very simple manner; others do not believe that social media affects
    their customers. There are a few banks that understand social media
    potential and are well set up for success, such as Wells Fargo
  • Online, tablet
    computing growth.
    Banks begin dabbling with tablet
    solutions, given the popularity of the iPad.
  • Mobile banking
    Mobile banking adoption is growing and mobile
    banking use increases during and immediately after marketing
    campaigns, such as splash pages on websites.
  • Contactless payments
    2010 was marked by a number of approaches intended
    to sort out the previous inability of banks, payment brands, mobile
    carriers, merchants and device/chip manufacturers to co-operate;
    for example, infrastructure building, NFC chips in handsets,
    contactless terminals at storefronts.
  • Remote deposit
    RDC, using des top scanning and smartphone
    approaches, is destined to grow rapidly.
  • Branch banking
    channel developments.
    Two trends are changing the impact
    of self-service: image ATMs and consumer/small business remote
    deposit capture. Banks need to identify in-branch sales metrics
    without customer inflows.

In Europe, meanwhile, few
banks adopted a customer-centric view due to the complexity of
internal system, products and delivery channels. In the coming
years, numerous IT projects at European banks will aim to provide a
360-degree customer view. Implementing branch automation solutions,
enhancing CRM capabilities and empowering branch officers will be
at the top of the agenda.

Pie chart showing Banks' IT spending by regionIn Asia-Pacific, banks
recognise smart phone potential, with smartphone banking services
having mass appeal in Japan, although the speed of penetration may
be slower than in Korea. In South Korea and Japan, payments card
issuers shifted their focus from card-based contactless payments to
mobile contactless payments.

With a mobile phone base of
740m in 2009, China is to be a major market for remote mobile
payments. Overall, the growth projections for the financial
services industry indicate a positive trend, with evidence of
greater emphasis on innovation. But it will take years before such
spending has a material impact on the massive percentage of funds
dedicated to maintenance activities.